Estimating Fiscal multipliers in the Eurozone. A Nonlinear Panel Data Approach

Salvatore Perdichizzi

No def058, DISCE - Working Papers del Dipartimento di Economia e Finanza from Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE)

Abstract: During the sovereign debt crisis, all euro countries have deployed \aus- terity packages", believing that they could regain the path of growth im- plementing structural reforms and cutting government spending. Such policies should have led to an initial decline in GDP followed by recov- ery and a reduction of the debt to gdp ratio. A key issue is the size of scal multipliers when the economy is in recession. We estimate a non- linear model allowing variations based on the state of the economy and we control for the macroeconomic characteristics across the Euro Area. The empirical evidence suggests that, an increase in government spending will be particularly e ective to boost aggregate demand, increase private consumption and investment in the short-to-medium run, without raising the debt to gdp ratio but rather decreasing it.

Keywords: Fiscal Multipliers; State-Dependent; Fiscal Policy; Public Finance. (search for similar items in EconPapers)
JEL-codes: E32 E62 (search for similar items in EconPapers)
Pages: 78
Date: 2017-05
New Economics Papers: this item is included in nep-dcm, nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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